Apple posts solid revenue, first quarterly profit drop since 2003

A customer gets help from an employee while looking at an iPad mini at an Apple… (David Paul Morris / Bloomberg )

Apple released its fiscal second-quarter earnings, reporting better-than-expected revenue but the first year-over-year quarterly profit decline since 2003.

The company posted profit of $9.5 billion, or $10.09 a share, and revenue of $43.6 billion. During the same quarter last year, Apple reported profit of $11.6 billion, or $12.30, on revenue of $39.2 billion.

Apple sold 37.4 million iPhones in the quarter, compared with 35.1 million in the year-ago quarter. IPad sales totaled 19.5 million compared with 11.8 million in the year-ago quarter. The company sold just under 4 million Macs, compared with 4 million in the year-ago quarter.

International sales accounted for 66% of the quarter's revenue, the Cupertino, Calif., company said.

“We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad,” Tim Cook, Apple’s CEO, said in a statement. “Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline.”

The company released its earnings after the markets closed; shortly before they were released, trading was temporarily halted. At 1:50 p.m. Pacific time, shares were up 4.3%, or $17.41, in after-hours trading.

During regular trading, shares rose $7.46, or 1.9%, to $406.13.

The consensus analyst estimate was that Apple would report $10.12 earnings per share with revenue of $42.6 billion.

Apple also announced that its board of directors had approved a 15% increase in the company’s quarterly dividend and has declared a dividend of $3.05 per common share, payable on May 16, to shareholders of record as of the close of business on May 13.

Apple is also dramatically expanding its share buyback program to $60 billion from $10 billion. The move comes after Apple's shares have plummeted more than 42% in the last six months. Generally it's a good idea for strong companies to buy back shares at a potential low point; many companies do the reverse and buy back stock at an unsustainable high, only to watch the shares fall and in effect waste their money.

Apple called it the largest single share repurchase authorization in history and said it is expected to be executed by the end of 2015.

As many had predicted, Apple lowered its outlook for the current quarter that ends in June.

Analysts' consensus was that Apple would report $39.52 billion in revenue. But in Tuesday's earnings release, the company offered a range of $33.5 billion and $35.5 billion, gross margin of 36% to 37%, and operating expenses of $3.85 billion to $3.95 billion.

For the third quarter in 2012, the company reported revenue of $35 billion.

Apple’s latest guidance suggests the company could see a year-over-year decline in revenue.

"I think they had a good quarter," said Patrick Moorhead of Moor Insights & Strategy. But "the outlook doesn’t look great. For people who are used to 25% to 50% increase, they are putting out a pretty slight increase. I don’t think the Street is going to like that. This is what most of the consternation on Wall Street has been about."

The good news, he said, is that investors should like the buyback program, which he said would help the stock by taking shares off the table.

Strategically, however, "I'd rather see them do something else with their money."

Apple will hold a conference call with analysts at 2 p.m. Pacific time. You can follow our live tweets of the call here.